MicroFinancial Incorporated Announces Second Quarter 2008 Results

WOBURN, Mass.--(Business Wire)--
MicroFinancial Incorporated (NASDAQ: MFI), a financial
intermediary specializing in vendor-based leasing and finance programs
for microticket transactions, today announced financial results for
the second quarter and the six months ended June 30, 2008.

Net income for the quarter ended June 30, 2008 was $1.9 million or
$0.13 per diluted share based upon 14,137,300 shares, compared to net
income of $1.4 million, or $0.10 per diluted share based upon
14,129,399 shares for the same period last year.

Revenue for the second quarter was $9.6 million compared to $7.5
million for the same period in 2007 as expected declines in rental
income were more than offset by growth in lease revenues. Revenue from
leases was $5.6 million, up $2.9 million from the same period last
year and rental income was $2.5 million, down $1.0 million as compared
to the second quarter ended June 30, 2007. Other revenue components
contributed $1.5 million for the current quarter, up $0.2 million from
the same period last year.

Total operating expenses for the current quarter increased 29.4%
to $6.7 million from $5.2 million in the second quarter of 2007. The
second quarter 2008 provision for credit losses increased to $3.1
million from $1.7 million for the same period in 2007. The allowance
for credit losses increased to $9.5 million or 11.5% of net investment
in leases as compared to $7.8 million or 10.75% of net investment in
leases as of March 31, 2008. During the second quarter net charge-offs
declined to $1.3 million from $1.6 million as compared to the same
period in 2007. Sequentially, amounts billed greater than 31 days
delinquent as of June 30, 2008 increased to $4.9 million from $3.8
million as of March 31, 2008. Selling, general and administrative
expenses remained flat for the quarter at $3.2 million as compared to
the second quarter of last year. Depreciation and amortization expense
declined 33.7% to $0.2 million for the quarter, due to a decline in
the number of rental and service contracts as well as the fact that a
greater percentage of these assets are fully depreciated. Interest
expense increased $221 thousand as a result of an increase in
borrowings under our line of credit.

Cash balances at June 30, 2008 were $6.0 million. Cash received
from customers in the second quarter increased 46.0% to $14.7 million
compared to $10.1 million during the same period in 2007. New
originations in the quarter increased by 44.7% to $17.9 million as
compared to the same period last year.

Richard Latour, President and Chief Executive Officer said, "We
are pleased with our continued growth in these difficult economic
times. The closing of our new bank facility on July 9, 2008, which
increased our line of credit from $30 to $60 million, will provide us
with additional capital to continue to execute on our overall
strategic objectives. From an operational standpoint, the second
quarter of 2008 produced new contract originations of $17.9 million,
an increase of $5.5 million as compared to the second quarter of 2007.
During the second quarter we processed approximately 16,000
applications totaling $109 million, an increase of approximately 70%
and 73%, respectively, over the second quarter of 2007. Our management
team will continue to focus our attention on expanding our vendor base
and origination business, as well as, looking for portfolios and other
opportunities."

For the six months ended June 30, 2008, net income was $3.4
million versus net income of $2.7 million for the same period last
year. Net income per diluted share year to date was $0.24 based on
14,151,034 shares versus $0.19 for the same period in 2007.

Year to date revenues for the six months ended June 30, 2007
increased 25.8% to $18.9 million compared to $15.0 million during the
same period in 2007. Revenue from leases was $10.5 million, up $5.9
million from the same period last year and rental income was $5.2
million, down $2.2 million from June 30, 2007. Other revenue
components contributed $3.2 million year to date, up $0.2 million from
the same period last year. New contract originations year to date June
30, 2008 were $35.3 million versus $22.5 million through the same
period last year.

Total operating expenses for the six months ended June 30, 2008
increased 27.3% to $13.7 million versus $10.8 million for the same
period last year. Selling, general and administrative expenses
declined $0.3 million to $6.4 million and depreciation and
amortization expenses declined 43.1% to $0.5 million. The provision
for credit losses increased to $6.4 million for the six months ended
June 30, 2008, as compared to $3.2 million for the same period last
year. Year to date net charge-offs declined to $2.6 million as
compared to $3.5 million for the same period last year. Interest
expense increased to $0.4 million as a result of increased borrowings
on our line of credit. Headcount at June 30, 2008 was 86, up from 74
at the end of the same period last year. Year to date cash from
customers increased $8.3 million to $27.9 million as compared to $19.6
million for the same period last year.

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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

June 30, December 31,
2008 2007
-----------------------
ASSETS

Cash and cash equivalents $ 5,387 $ 7,080
Restricted cash 570 561
Net investment in leases:
Receivables due in installments 123,618 92,314
Estimated residual value 13,117 9,814
Initial direct costs 997 729
Less:
Advance lease payments and deposits (572) (219)
Unearned income (45,234) (35,369)
Allowance for credit losses (9,499) (5,722)
-----------------------
Net investment in leases 82,427 61,547
Investment in service contracts, net 90 203
Investment in rental contracts, net 117 106
Property and equipment, net 850 782
Other assets 842 703
-----------------------
Total assets $ 90,283 $ 70,982
=======================

LIABILITIES AND STOCKHOLDERS' EQUITY

June 30, December 31,
2008 2007
-----------------------
Notes payable $ 21,377 $ 6,531
Capital lease obligation 150 -
Accounts payable 1,247 1,350
Dividends payable - 698
Other liabilities 1,419 801
Income taxes payable 378 228
Deferred income taxes 1,980 546
-----------------------
Total liabilities 26,551 10,154
-----------------------

Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000
shares authorized; no shares issued at June
30, 2008 and December 31, 2007 - -
Common stock, $.01 par value; 25,000,000
shares authorized; 13,987,528 and
13,960,778 shares issued at June 30, 2008
and December 31, 2007, respectively 140 140
Additional paid-in capital 45,586 45,412
Retained earnings 18,006 15,276
-----------------------
Total stockholders' equity 63,732 60,828
-----------------------
Total liabilities and stockholders' equity $ 90,283 $ 70,982
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MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)

Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------

Revenues:
Income on financing
leases $ 5,596 $ 2,653 $ 10,536 $ 4,686
Rental income 2,484 3,514 5,236 7,438
Income on service
contracts 240 329 499 690
Loss and damage
waiver fees 768 473 1,456 917
Service fees and
other 532 330 1,080 716
Interest income 27 247 87 570
-----------------------------------------------
Total revenues 9,647 7,546 18,894 15,017
-----------------------------------------------

Expenses:
Selling, general and
administrative 3,198 3,158 6,437 6,726
Provision for credit
losses 3,060 1,677 6,417 3,200
Depreciation and
amortization 230 347 460 810
Interest 234 13 386 26
-----------------------------------------------
Total expenses 6,722 5,195 13,700 10,762
-----------------------------------------------

Income before
provision for income
taxes 2,925 2,351 5,194 4,255
Provision for income
taxes 1,053 902 1,765 1,589
-----------------------------------------------

Net income $ 1,872 $ 1,449 $ 3,429 $ 2,666
===============================================

Net income per common
share:
Basic $ 0.13 $ 0.10 $ 0.25 $ 0.19
===============================================
Diluted $ 0.13 $ 0.10 $ 0.24 $ 0.19
===============================================
Weighted-average
shares:
Basic 13,987,528 13,912,228 13,981,216 13,886,524
===============================================
Diluted 14,137,300 14,129,399 14,151,034 14,101,436
===============================================
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About The Company

MicroFinancial Inc. (NASDAQ: MFI), is a financial intermediary
specializing in microticket leasing and financing. MicroFinancial has
been operating since 1986, and is headquartered in Woburn,
Massachusetts.

Statements in this release that are not historical facts,
including statements about future dividends or growth plans, are
forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. In addition,
words such as "believes," "anticipates," "expects," "views," "will"
and similar expressions are intended to identify forward-looking
statements. We caution that a number of important factors could cause
our actual results to differ materially from those expressed in any
forward-looking statements made by us or on our behalf. Readers should
not place undue reliance on forward-looking statements, which reflect
our views only as of the date hereof. We undertake no obligation to
publicly revise these forward-looking statements to reflect subsequent
events or circumstances. We cannot assure that we will be able to
anticipate or respond timely to changes which could adversely affect
our operating results. Results of operations in any past period should
not be considered indicative of results to be expected in future
periods. Fluctuations in operating results or other factors may result
in fluctuations in the price of our common stock. For a more complete
description of the prominent risks and uncertainties inherent in our
business, see the risk factors described in documents that we file
from time to time with the Securities and Exchange Commission.

MicroFinancial Incorporated
Richard F. Latour, 781-994-4800
President and CEO

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